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Dexia Holding v Countrywide and the Sub-prime Crisis - the Scope of the Fraud May Begin to

by Human Rights Alert, NGO Friday, Jan. 28, 2011 at 1:53 PM PO Box 526

The complaint signals a break of ranks in the tight formation of banks, attorneys, judges, and regulators, and rebellion by northeastern states against fraud epidemic that was spawned in the southwest. "Corruption of the courts and the legal profession" is at the crux of the fraud.

Los Angeles, January 27 - upon review of the complaint in Dexia Holdings Inc et al v Countrywide Financial Corp et al,[[i]] it appears that the scope of the fraud on the People, on the US Congress, and on the international community, which is at the foundation of the financial crisis, may finally begin to unfold. The complaint exposes the essence of the criminality by large financial institutions such as Countrywide and BofA, and the scope of cover-up and deception by US government officers and agencies over the past decade.

The complaint was filed in the State of New York Court in Manhattan. The courts of the northeastern states, Massachusetts, New York, appear as a ray of hope. Removal of the complaint to the US District Court in Manhattan is likely to lead to conduct, similar to that which was seen last year in litigation of SEC v BAC under Judge Jed Rakoff, alleged as Fraud on the Court. [[ii]]

The public must perform its civic duty and closely monitor the conduct of the litigation.

Core allegations of 'massive fraud'

The complaint focuses on two aspects of the "massive fraud" and recklessness in the Los Angeles County, California, based Countrywide Financial Corporation:

� Fraud on the US treasury through a decade-long reckless underwriting of government-backed sub-prime loans;

� Fraud in funding the US-backed loans while failing to secure real property titles as collaterals;

� Fraud on other financial institutions through securitization of the resulting mortgages as high-grade investments.

Parts of the 'massive fraud' in underwriting and securitization are left out of the complaint

The complaint leaves out some key aspects of the fraud in underwriting and securitization:

a. At least since 2004, Countrywide engaged not only in the reckless underwriting of sub-prime loans, but also in the funding of sub-prime loans with no underwriting at all. US law enforcement and Banking Regulators were fully cognizant, but routinely refused to enforce the law. Later they told the US Congress and the People that there was no evidence of criminality at Countrywide.

b. The evidence shows large-scale fraud in the implementation of invalid electronic underwriting and document archiving systems at Countrywide and later at BofA. Therefore, the holders of the securities are left with no valid records, and the US with no valid data for risk assessment and risk reduction.

Other parts of the 'massive fraud' are left unmentioned, since they are not germane to the complaint

Other critical aspects of the fiasco are external to the causes of the complaint, but essential for understanding the causes of the current crisis and the likely future of the complaint :

� Under the Clinton administration banking deregulation was initiated, which was promoted by some prominent members of the rotating White House economic teams over the past two decades. It was continued in full force under the Bush administration.

� At the end of the Bush administration, when sub-prime lenders started to collapse, senior US officers coerced the Countrywide-BofA and Merrill Lynch-BofA mergers through alleged criminality. [[iii]]

� In recent years, fraud has become a routine in foreclosure proceedings, resulting in dispossession and looting of the home-owning US middle-class; it was conducted as a joint venture of banks, attorneys, and judges from coast to coast, with law enforcement non-existent. [[iv]]

"Corruption of the courts and the legal profession and discrimination by law enforcement" [[v]] are central to the crisis:

Law enforcement, the courts, and the legal profession are at the heart of the betrayal. Their part in the financial crisis is probably the least reported part of the crisis:

� In the decade prior to its collapse, alleged racketeering in the courts by the Legal Department of Countrywide, headed by then Chief Legal Officer Sandor Samuels (today - BofA Associate General Counsel) in collusion with large national law firms, such as Bryan Cave, LLP, was commonplace. Such conduct continues to this date by BofA.

In the Superior Court of Los Angeles County, California, alleged racketeering was documented, in collusion with California judges, including, but not limited to, Jacqueline Connor, John Segal, Terry Friedman, Gerald Rosenberg, Patricia Collins, Lisa Hart-Cole, and in the US District Court in Los Angeles - US Judge Virginia Phillips, and US Magistrate Carla Woehrle, and former President of the LA Bar Association David Pasternak. Fraud expert, FBI veteran who was decorated by US Congress, US Attorney General, and FBI Director provided opinion of fraud in the case. Regardless, FBI and US DOJ refuse to this date to enforce the law in LA, even after Congressional Inquiries. [[vi],[vii],[viii]]

� In January 2008, the collapse of Countrywide was not caused by the failure of its loan portfolios. Instead, it was caused by news reports of conduct of attorneys on behalf of Countrywide in the US Court in Pennsylvania - the introduction as evidence of fraudulent computerized banking records ("recreated letters"). [[ix]]

� In March 2008, detailed evidence of the routine methods of Fraud on the Court by the Countrywide "legal team" was provided by the US Texas Court: appearances of outside attorneys, who were not authorized as Counsel of Record, with "no communications with client" clause. [[x]]

� In December 2008, central to the alleged criminality in the Merrill Lynch-BofA merger was the ouster on BofA General Counsel Timothy Mayopoulos, and his replacement by Brian Moynihan (today - BofA President), who at the time had no significant experience in the practice of the law. A series of investigations of the matter led nowhere. However, the evidence shows that Mayopoulos attempted to comply with the law, and that within 24 hours after Moynihan's appointment, alleged racketeering by the BofA "legal team" was resumed. [v,vi,vii]

� In late 2010, the use of fraudulent "robo-signatures" by banks in foreclosure proceeding was reported. [[xi]] It was not the high volume, which required the use of "robo-signatures" for generating fraudulent banking records in foreclosure proceedings. There simply were no valid banking records. The evidence in Dexia Holdings v Countrywide is likely to dwell on that point.

� In late 2010, Circuit Judge Jack Schramm Cox, Martin County, Florida, blocked efforts by the Florida Attorney General to investigate fraud by law firms in foreclosure proceedings. Of note, federal agencies failed to intervene. [[xii]] The ongoing wave of fraud in foreclosure proceedings across the US was not likely to take place, had attorneys not known that judges were going to accept fraudulent banking records as evidence, and that the risk of any law enforcement action was null.

� In 2009-10, Judge Jed Rakoff and Clerk Ruby Krajick, US District Court, Southern District of NY, Manhattan, colluded in alleged Fraud on the Court in SEC v BAC, a widely report case, which was meant to create the false appearance of effective banking regulation. [ii]

The tight linkage between judicial corruption and corruption of financial institutions is possibly the least reported part of the current crisis. California State Judge Terry Friedman, US Judge Virginia Phillips, and US Magistrate Carla Woehrle refused to provide statements on the record that they did not receive financial benefits from Countrywide or BofA.

Through such conduct in the courts, financial institutions and their executives were effectively vested in indemnity for both past and future criminality. [[xiii]]

Through it all, US banking regulators and law enforcement have repeatedly provided the US Congress and the People sworn testimonies that no criminality could be found in sub-prime lenders, and that the crisis was the outcome of changing market conditions. We have also been falsely told that banking regulation has been "shored up".

Although not directly linked to the banking crisis and fraud in the courts, Citizens United v FEC in the Supreme Court of the United States was the ultimate expression of this trend - a Robber Baron Rival Era under the stamp of legitimacy by the courts. [[xiv]]

The crisis was spawned in southwest, the northeast state courts provide a ray of hope

Already in the early 2000s, FBI reports distinguished Los Angeles County, California, home of Countrywide as "the epicenter of the epidemic of real estate and mortgage fraud, which is a high national priority to fight". The evidence shows that synergy between the Los Angeles Superior Court and Countrywide was integral to the distinction.

In contrast, the state courts and law enforcement in Massachusetts and New York may be the key for corrective actions:

� In April 2009 then New York state Attorney General Andrew Cuomo issued a letter to the US Senate as summary of his investigation into the Merrill Lynch-BofA merger. [iii] It described what analysts called a "criminal conspiracy" and "bigger than Watergate", involving Federal Reserve Chair Ben Bernanke, former Treasury Secretary Henry Paulson, former BofA President Ken Lewis, and others. Cuomo proceeded to prosecute the case in the State of New York Court.

Perhaps most telling was the fact that Cuomo did not send his findings in a confidential memo to the FBI and US Attorney Office, but instead - in an open letter to the US Congress.

� Earlier this month a ruling was issued under US Bank v Antonio Ibanez in the Massachusetts Supreme Court, which may put an end to fraud in foreclosure proceedings in the courts in that state, or even void thousands of previously executed foreclosures. [[xv]]

� Now comes the filing of the complaint in Dexia Holdings v Countrywide in the Supreme Court New York. The ruling in US Bank v Antonio Ibanez was possibly part of the motivation for the filing of Dexia Holdings v Countrywide, since voiding of the fraudulent banking records leaves the investors in Countrywide�s securities with nothing at all.

The complaint in Dexia Holdings v Countrywide amounts to breaking of the ranks in the so-far tight formation of banks, judges, law-firms, and regulators. It pits Plaintiffs, mostly from New York, against Defendants, mostly from Los Angeles County, California. It also spills the beans on the false explanations for the crisis, which have been provided to the People of the US and the international community through numerous hearings, investigations, and court proceedings in recent years.

What next?

The Robber Baron Era of the late 19th century took several decades to undo. Today news and documents spread in incomparable speed. Leaks of BofA records are expected soon as well. Today's international arena, and US standing in it, are also incomparable to those of the previous century.

As a result, both the People of the US and the international community may soon be able to appreciate the scope of the fraud. It is claimed to be historically unprecedented, both in its dollar volume and in demonstrating the collapse of the frameworks of government in a "western democracy":

1) Honest discussion and reform of the state and US judiciary should start with no further delay.

Official FBI policy was stated in 2008 as follows: "FBI will pursue all allegations of judicial corruption vigorously, as public corruption violations are among the most serious of all criminal conduct and can tear at the fabric of a democratic society".

2) In view of the new evidence that is likely to emerge in Dexia Holdings v Countrywide, all past sworn testimonies by senior US officers from FBI, US Department of Justice, SEC, Office of the Controller of the Currency, Office of Thrift Supervision, Federal Trade Commission, and the Federal Reserve before US Congress should be carefully re-examined.

The public should be informed regarding the magnitude of the deception by such agencies.

3) The US government should enforce e-government laws and regulations on electronic banking systems.

The US Congress enacted laws, presidential directives were issued, regulations were promulgated, and systems were implemented for authentication and validation of e-government in the Executive Branch. The Basel Accords on international banking, likewise, require validation of electronic banking systems. Regardless, both underwriting and funding of sub-prime loans are conducted through invalid, unauthenticated systems.

An honest and courageous New York state judge can make a difference in this matter. On the other hand, removal of the case to the US District Court, Manhattan, may result in litigation of the kind that was seen in SEC v BAC last year, alleged as Fraud on the Court.

Therefore, the public should perform its civic duties and carefully scrutinize the conduct of all parties and particularly, conduct of the courts, in litigation of Dexia Holdings v Countrywide.



[i] 11-01-24 Complaint in Dexia Holdings Inc et al v. Countrywide Financial Corp et al (650185/2011) New York State Supreme Court, New York County

[ii] 11-01-10 Request for investigation/impeachment proceedings, in re: US Judge JED RAKOFF and Clerk RUBY KRAJICK, US District Court, Southern District of New York, Conduct of Securities and Exchange Committee v Bank of America Corporation (1:09-cv-06829) s

[iii] 09-04-23 RE: SEC v BAC (1:09-cv-06829) State of New York Attorney General Andrew Cuomo Letter to US Congress and analysts' responses:

[iv]10-10-08 a) AP - Bank of America Issues Nationwide Moratorium on Foreclosures, b) CNBC - Foreclosure Primer

[v] 10-04-19 Human Rights Alert (NG0) submission to the United Nations Human Rights Council for the 2010 Review (UPR) of Human Rights in the United States as incorporated into the UPR staff report with reference to "corruption of the courts and the legal profession"

[vi]10-05-05 Countrywide Bank of America NYSE BAC and its President Brian Moynihan Compilation of Records Evidence of Racketeering

[vii] 10-05-05 Chairs of US Congress Committees of the Judiciary and Banking Are Requested to Join Senator Feinstein's Inquiries on Comptroller of the Currency

[viii]10-07-06 Complaint Filed with US Attorney Office Los Angeles Against Moynihan Bank of America [NYSE:BAC] Bryan Cave LLP Alleging Racketeering

[ix] 08-01-08 Case of Borrower Diane Sharon Hills (01-22574) in the US Bankruptcy Court, Eastern District of Pennsylvania: Countrywide's three "recreated letters", transcript, and news reports:

[x] 08-03-05 Case of Borrower William Parsley (05-90374), Dkt #248: Judge Jeff Bohm's Memorandum Opinion, rebuking Countrywide's litigation practices, Countrywide's false outside counsel scheme - appearances by counsel who are not Counsel of Record, with "no communications with clients" clause:

[xi] 10-09-22 Robo-Signatures - the latest computer fraud in US banking and courts

[xii] 10-12-29 Florida: Corruption of the Courts and the Legal Profession - with Impunity! State of Florida Attorney General v Fishman & Shapiro, LLP (4DI0-4526)

[xiii] The Los Angeles Superior Court went as far as issuing a false "Indemnity Agreement" for Old Republic International, for what was later opined as Real Estate Fraud.

10-08-22 Samaan v Zernik (SC087400) - Complaint against former Judge Patricia Collins, Judge Lisa Hart-Cole, Attorney David Pasternak, Old Republic International [NYSE:ORI] and others - for public corruption and racketeering by judges, financial institutions, and large law-firms in pretense proceedings at the Court.

[xiv] 10-11-06 Citizens United v Federal Election Commission, 130 S.Ct. 876 (2010) a landmark decision in ushering in a Robber Baron Revival Era.

[xv] 11-01-07 An End in Sight to Fraud on the Courts by US Financial Institutions? a) Massachusetts Supreme Court Ruling Has Potential to Void Thousands of Foreclosures - WashPost; b) US Bank v Antonio Ibanez in the Massachusetts Supreme Court - January 7, 2011 Ruling


Human Rights Alert is dedicated to discovering, archiving, and disseminating evidence of Human Rights violations by the justice systems of the State of California and the United States in Los Angeles County, California, and beyond. Human Rights Alert focuses on the unique role of computerized case management systems in the precipitous deterioration of the integrity of the justice system in the United States.




* "On July 26, 2010, Laurence Tribe, Senior Counsel for the United States Department of Justice, Access to Justice Initiative, delivered an important speech to the Conference of Chief Justices, challenging them to halt the disintegration of our state justice systems before they become indistinguishable from courts of third world nations."

Prof Laurence Tribe, Harvard Law School (2010), per National Defender Leadership Institute



* "Innocent people remain in prison"

* "...the LA Superior Court and the DA office, the two other parts of the justice system that the Blue Panel Report recommends must be investigated relative to the integrity of the system, have not produced any response that we know of..."

LAPD Blue Ribbon Review Panel Report (2006)

* "...judges tried and sentenced a staggering number of people for crimes they did not commit."

Prof David Burcham, Dean, Loyola Law School, LA (2001)

* "This is conduct associated with the most repressive dictators and police states... and judges must share responsibility when innocent people are convicted."

Prof Erwin Chemerinsky, Dean, Irvine Law School (2001)



* "...corruption of the courts and the legal profession and discrimination by law enforcement in California."

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